How to use a checklist for better Markets in Financial Instruments Directive (MifID II) compliance

Checklists sometimes come in for a bit of a hard time.

‘Taking a checklist approach’ has come to signify doing the bare minimum; ticking a box to show a job has been done, without looking at the big picture.

And while this might be true, there are times that a list can come in very useful.

Here we look at how checklists can be helpful in ensuring you to comply with the new MifID II  requirements – and what you might want to consider alongside your list to make sure you’re not just ‘ticking a box’.

When are checklists not a good thing?

There are times when checklists are not the best approach. Or – to be more accurate – not the best only approach.

In fact, a list can be a highly valuable tool. And this can be true for any type of project, not just compliance-related ones.

Problems tend to arise when checklists are used in place of a full understanding of the issue in question.

Let’s take the MifID II requirements, and how they apply to financial promotions, as an example.

Say you haven’t familiarised yourself with the new demands of the updated Directive, and you use a checklist to make sure your FPs comply.

You might tick off the individual aspects – looking at issues like prominence; performance information and disclaimers. But are you taking a holistic look at your promotion to make sure that it meets the requirements in its entirety, as well as within each of the individual elements?

Probably not.

When a checklist works

A checklist really comes into its own when it’s used in conjunction with:

  • A full understanding of the issues you need to be checking
  • An overview of the project in question, to ensure that the ‘whole’ as well as the component parts, meets the necessary standards

It can be very useful in making sure all elements of a project are ticked off. This is particularly helpful in compliance, where you need to be sure (and to evidence) that you have met all the requirements of a regulation.

Having an audit trail that meets the rules – covering reviews, amendments and approvals – is essential, and a list can be a very good way of checking and documenting that the requisite steps have been taken.

Why a MifID II checklist?

The updated Directive introduces a range of new demands. If you need a recap, you can read more about what you need to do to be compliant. In particular, financial promotions will be impacted, with the definition of FPs expanded to include communications to professional clients.

So – having a list of requirements to tick off and check that you have dealt with everything can be a huge bonus.

But you need to make sure your use of the list is supported by a full understanding of the new rules and your obligations.

That’s why we’ve worked with Perivan Technology, to produce not just a MiFID II checklist but also a downloadable summary of MiFID II requirements. Together, they can help you to ensure your approach to MiFID II complies with the requirements.

With the new rules impacting operations and financial promotions, you will play a key role in educating your marketing, sales and other teams on what they need to do. It’s now less than two months until they come into force, and there are things you should be doing now to prepare.

Although the Financial Conduct Authority (FCA) has indicated that it will be lenient on firms that don’t meet the deadline, as long as they have shown that they’re taking steps to comply – it’s better to be safe than sorry. There’s a lot of work to do.

Ensuring MiFID II compliance

So how can you make sure you comply?

  1. Get a full understanding of the new rules. Download our summary and read our past blogs on what you need to do to be compliant and the changing rules on FPs.
  2. Keep an eye on the regulator’s communications. The FCA website has regular updates as requirements are clarified and the approach is firmed up.
  3. Identify what you need to do to ensure your promotions meet the upgraded requirements.
  4. Automating some of your processes – for example, via an online slide library or automated workflow tool that mandates compliance approval and keeps a compliant audit trail – can help to ensure compliance. Decide whether this is something you want to explore.
  5. Use a checklist to double check that you’ve met all the requirements

Download our free requirements summary and checklist

If you want to ensure you understand the new Directive’s requirements and are meeting them successfully, you can download our Requirements Summary and Checklist. They’re free and can help you to make sure you’re on top of the new rules.

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